{"id":663,"date":"2013-09-24T12:33:48","date_gmt":"2013-09-24T19:33:48","guid":{"rendered":"http:\/\/chasingeden.com\/?p=663"},"modified":"2023-04-01T19:10:02","modified_gmt":"2023-04-02T02:10:02","slug":"the-free-market-doesnt-exist-except-as-a-rhetorical-device","status":"publish","type":"post","link":"http:\/\/chasingeden.com\/?p=663","title":{"rendered":"The free market doesn’t exist except as a rhetorical device."},"content":{"rendered":"\t

I’ve talked about this before<\/a>, and it is also discussed very well here.<\/a><\/p>\n\t

The line of thought goes like this:\u00a0 “Producers competing against each other benefits us all.\u00a0 Free of government intervention, supply and demand sets the optimal market price.\u00a0 Through open and free competition, the invisible hand of the market leads to the most efficient economic outcomes.”<\/p>\n\t

The offshoot of this logic is “The free market outcome is the best and natural outcome, free from interference”.<\/p>\n\t

I don’t think this is true in a practical sense.<\/p>\n\t

Firstly, the government creates the market.<\/strong>\u00a0 Always.\u00a0 Look at our economy and I’ll challenge you to find one significant instance of a market that is not HEAVILY underpinned by government.\u00a0 Here are some (but not even close to all) examples of the underpinnings.<\/p>\n\t

Corporations: \u00a0 Our modern economy is run by corporations, which are government created entities.\u00a0 They are a legal invention.\u00a0 There is nothing natural or free about them.<\/p>\n\t

Money:\u00a0 Without the government creating commonly accepted currency, I’m not sure how we’d pay for anything in our fictional free market.\u00a0 Companies could issue their own currency (so could I for that matter), though I’m not sure who would accept it.<\/p>\n\t

Contracts and Law:\u00a0 The court system and contract law allows companies to interact and provides a baseline enforcement of trust.\u00a0 I’m not sure what kind of entrepreneurship<\/a> business you’d get if there were no common contract law…because you’ll never find an instance of it.\u00a0 Government creates the opportunity for the market in the first place by underpinning it with the rule of law.<\/p>\n\t

Copyright:\u00a0 The modern, technology enabled market is created in large part by intellectual property protection.\u00a0 This is a legal creation of the government.\u00a0 Name a few large companies (e.g. Apple), and you’ll find many of them are insulated from the free market by copyright protection.\u00a0 There is nothing natural or free about copyrights.<\/p>\n\t

Employee Education:\u00a0 Every employer and market benefits from government\/publicly educated employees.\u00a0 Companies don’t like to train their employees; its expensive.\u00a0 What if entry level employees couldn’t even read?<\/p>\n\t

Roads:\u00a0 There is no market if people can’t get to it.\u00a0 I’m sure companies could build their own roads; not sure how many there would be though, or what kind of expensive pass you’d need to get on each company’s\u00a0 special road type that only led to their store.<\/p>\n\t

Secondly, it is really hard to argue in practice against a free market that only exists in theory.<\/strong><\/p>\n\t

You can’t “disprove” the free market, because you’ll never find a real instance of it to argue against.\u00a0 Some markets are surely less regulated\/governed than others, but because the government creates the conditions of the market…they are never separate and so defending the free market is like arguing over the hair color of Bigfoot<\/strong>: \u00a0 We can come up with lots of good reasons for white or brown (depending on habitat or season)…..but since there are no actual Bigfoots, we will never arrive at a conclusion.<\/p>\n\t

Thirdly, thinking that the absence of interference in the market is good, is like saying that what is natural is what is good<\/strong>.<\/p>\n\t

That isn’t true, period.\u00a0 Hume solved this for us long ago.\u00a0 Dying of cold in the winter would be quite natural if we didn’t put on a jacket (something that isn’t natural).\u00a0 In fact, we can owe the relative comfort of our existence, to the struggle against what is natural.<\/strong>\u00a0 We seek to be cooler in the summer, and warmer in the winter.\u00a0 We want abundant food when scarcity is natural.\u00a0 We seek to be dry when it is wet, and want water when it is dry.\u00a0 We want youth as we naturally age, and want to be well when we naturally fall ill.\u00a0 We seek order always, when disorder is naturally all around us.<\/p>\n\t

Saying that we should leave the market to itself, and that by some “invisible hand” it will produce the best outcome for us goes against all evidence<\/strong>.\u00a0 Its like saying “I’m going to sit outside in the winter and expect an “invisible hand” to make me warm and comfortable.”\u00a0 We intervene in what is natural all the time to our benefit…why would the free market be the exception to that?<\/p>\n\t

Thinking that the free market, natural outcome is the best outcome leads to some odd lines of thought (quote from Robert Reich):<\/p>\n\t

“By this view, if some people aren\u2019t paid enough to live on, the market has determined they aren\u2019t worth enough. If others rake in billions, they must be worth it.\u00a0 If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they\u2019ll earn next month or next week, that\u2019s too bad; it\u2019s just the outcome of the market.”<\/p>\n\t

To me, that sounds like we’re shirking our responsibility to ourselves.\u00a0 It is as if we’ve given “the market” omniscient, god-like properties.\u00a0 It “knows” what prices should be.\u00a0 It “knows” how best to allocate between capital and labor.\u00a0\u00a0 It “knows” how many hours a week we should work.\u00a0 How?\u00a0 I look at a market and I see people.<\/p>\n\t

The market is a metaphorical construct that can’t “know” anything at all in the traditional sense.\u00a0 People know and decide.\u00a0 Leaving it up to “the market” is much like leaving it up to chance…a practice which, if employed outside in the winter, will leave you frozen to death.<\/p>\n\t

The bottom line is that, through government, we create the conditions of the market.\u00a0 We are free to change them if we don’t like the current market outcome, because we created the current market outcome in the first place.<\/em><\/strong><\/p>\n\t

In light of the above, I maintain that the “free market” is, in practice, a rhetorical device<\/strong> used by those interested in deregulating a certain sector of their market for their own benefit.\u00a0 If it were not for “their own benefit”, they would be arguing for continued or increased regulation\u00a0 (For instance car dealerships are arguing Tesla’s direct sales model is illegal.<\/a>).\n<\/p>\n","protected":false},"excerpt":{"rendered":"

I’ve talked about this before, and it is also discussed very well here. The line of thought goes like this:\u00a0 “Producers competing against each other benefits us all.\u00a0 Free of government intervention, supply and demand sets the optimal market price.\u00a0 Through open and free competition, the invisible hand of the market leads to the most […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0},"categories":[9],"tags":[28,72,59],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3IMYj-aH","jetpack-related-posts":[{"id":386,"url":"http:\/\/chasingeden.com\/?p=386","url_meta":{"origin":663,"position":0},"title":"What is the “Free Market”?","author":"kellio","date":"December 18, 2010","format":false,"excerpt":"I can't believe I haven't written about this before, but here goes: Free Market: When we think of the free market, it conjures up the classic example of an open air market where there are a near infinite number of sellers all right next to each other with similar items.\u2026","rel":"","context":"In \"economics\"","block_context":{"text":"economics","link":"http:\/\/chasingeden.com\/?tag=economics"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":769,"url":"http:\/\/chasingeden.com\/?p=769","url_meta":{"origin":663,"position":1},"title":"Income Inequality: Labor is losing and we should care (since we are Labor)","author":"kellio","date":"January 13, 2015","format":false,"excerpt":"Many believe some version of the following regarding income inequality: The current income distribution is the free market outcome; we can't regulate ourselves out of income inequality...it is a natural outcome of our global economy. 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